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Monthly Precious Metals Technical Analysis Report - July 2020

06 August 2020

Gold – In Brief

An enormous month for gold in July, with USD gold closing US$202 above the open. The rally was fuelled by (apparent) economic pessimism, accompanied by declining real rates, and rapid weakening of the Dollar. (The Dollar index opened at 97.387 and has made a low at the end of July of 92.546, close to a long-term target of 92.176.)

Measures of financial stress rose, along with signs of a weakening jobs market in the US. Infrequent and lagging data reports implied a stronger recovery, whilst high-frequency data told a story of a muted or stagnating recovery. For example, data from the TSA shows passenger throughput languishing at or below the 500,000 per day mark, compared with 2019 numbers of circa 2,500,000. Google Trends shows a notable rebound in the search term ‘unemployment benefits’ reaching 42% of the April high.  

The rate of coronavirus infections has picked up sharply in America, and this has acted as a proxy for the pace of economic recovery, and the principal determinant of FX outcomes, helping to explain the Dollar’s rapid decline. Data from Johns Hopkins shows a decline in the moving average of the infection rate going into August.

Where to from Here?

The sharp decline in yields and the Dollar Index has pushed gold sharply higher very quickly.  It has been very hard to call a top, and a bit pointless to try, but recent targets to US$2,060 levels may indicate where a nearby top may form. The longer-term target is US$2,395.

Resistance

US$2400 1 % Point and Figure target
US$2,115 Fibonacci extension on weekly candles
US$2,064 Target on Hourly Point and figure

Supports

US$1,978.00 Daily Turning Line
US$1867.00 Weekly Turning Line
US$1,754 Weekly Standard Line
US$1,597 Weekly Cloud top
US$1440-50 Band of support November 2019, successfully tested March 2020

Targets (Upside)

All target probabilities basis spot US$2,040 for 3 months.
US$2,395 Daily Point and Figure (1.00 % Log) 14 %
US$2,115 Fibonacci extension 39%

Supports (Downside)

All target probabilities basis spot US$2,040 for 3 months.
US$1867 Weekly Turning Line support 18 %
US$1754 Weekly Standard Line support 8%
 
Read Nick's full monthly analysis here.

Until next time,
 
Nicholas Frappell
Global General Manager
ABC Bullion